Friday, March 01, 2013

Bad news for Leap Wireless: iPhone sales at its Cricket Wireless division are half of its commitment

If you are wondering how well the prepaid iPhones being sold by Leap Wireless' Cricket Communications are doing, the answer is here: not well. On Thursday, the Wall Street Journal reported that unsold iPhones are piling up, with the company saying it is only on track to sell about half the devices it committed to.

In late May of 2012, Cricket was reported to be the first pre-paid (pay-as-you-go, no-contract) carrier given access to the world's top-selling single smartphone, Apple's iPhone. However, to gain access, Leap Wireless had to commit to sell a certain number of devices. The first year of its contract with Apple ends in June.

Given that black fact, Leap said that at this rate, the company could end up with $100 million worth of unsold iPhones by the time the first year of the contract completes. Since it committed to those iPhones, it has to eat them if they can't sell them.

Leap has about 5.3 million total subscribers, but it faces a number of challenges. Not only does it lack the national networks of the country's biggest carriers (Verizon, AT&T, Sprint, T-Mobile), because of technological limitations it can't sell the iPhone in all of its markets.

As Cricket is a pre-paid carrier, customers don't receive any sort of carrier subsidy when purchasing a phone, but then pay less per month for their service. They have to pay full price, although Cricket customers get a slight break. An unlocked iPhone 5 costs $649; Cricket sells it for $500.

Cricket's problems could bode ill for T-Mobile USA, the nation's number four largest wireless carrier. The company -- to this point -- has not sold the iPhone, but it has confirmed it will sell the device later this year. As it does so, however, T-Mobile will eliminate its device subsidies.

However, the company said that as it embraces its so-called Value Plans. T-Mobile's Value plans let customers pay the full cost of their smartphones or pay it monthly in exchange for lower monthly service rates. Customers can also bring their own devices to the network.

How it works is still undefined, but T-Mobile USA said that that customers may be able to purchase the "most iconic device in the world" for $99 and then pay monthly installments of $15 or $20 over the next 20 months. If that is the case, it may more attractive than an up-front $500 cost and a less-than nationwide footprint, as in the case of Cricket.

Time will tell.

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